Simple Quizzes Designed to Help the Perplexed

Until recently, no-load mutual funds were a lot like discount brokerage services. They’d sell you whatever you wanted, but they couldn’t and wouldn’t give out advice.

But that’s changed dramatically in the past several months as an increasing number of big mutual fund companies attempt to steer displaced bank depositors into appropriate and cost-effective investments. Companies ranging from Dreyfus to Stein Roe to Scudder, Stevens & Clark have all started to give consumers at least some direction when investing in no-load funds, industry experts say.

Latest to bow to the trend is Fidelity Investments, the nation’s biggest mutual fund company with $188 billion in assets and some 190 different funds under management. Fidelity recently announced “FundMatch”--a two-step program that shows you how to divvy your assets and invest.

The program pivots around a consumer quiz that will be available in Fidelity’s branches starting this January.

You answer a series of questions about your age, assets, responsibilities and views about risk, and add up your score. The final tally will cause you to fall into one of five categories, each of which is accompanied by a pie chart that says how much of your assets should be in which kind of investment--stocks, bonds and cash.

Notably, experts maintain that how you divide your investments has very little to do with current market conditions. You put money in stocks when you’ve got a lot of time and you don’t worry about short-term price swings. You put money in bonds when you want to keep pace with inflation while preserving your principal. When you need your money within a year or two, you put it in cash investments, such as short-term Treasury bills and bank certificates of deposit. Although cash investments pay the least, they’re not subject to market gyrations either.

According to Fidelity’s quiz, if your responses add up to less than 45, you should keep all your money in cash. A step above that is half cash (which includes short-term Treasury bills), 30% bonds and 20% in stock. The middle-of-the-road portfolio is 20% cash, 40% stock and 40% bonds, while the higher-end portfolio is 65% stocks, 30% bonds and only 5% cash. Really high scorers--those with tallies of 180 and more--can have a 100% in stock.

Once you get your score, you either create a portfolio based on the appropriate pie chart, or you can buy one of three Fidelity mutual funds--called “asset managers”--which are supposed to buy stocks, bonds and CDs in quantities that roughly conform to the three mixed-asset pie charts.

In broad generalities, Fidelity’s Asset Manager-Growth is for the young and the wealthy; Asset Manager-Income is for the aged and risk-adverse; and the straight “Asset Manager” is for everybody else. (Scores are heavily weighted by how soon you’ll need the money, so if you are young, affluent and child free, you wind up with a much higher score than someone of modest means who is a few years from retirement.) If you want to buy one of Fidelity’s asset managers, you’re given an 800 number. But Fidelity says no one will try to sell the funds to you.

Dreyfus Corp. offers a similar quiz-based program. But you send the responses in to the New York-based mutual fund company and they send back recommendations for, usually, several funds. Dreyfus, which has been doing this for about a year, doesn’t have pie-chart funds. And the company acknowledges that a salesman might call, if you fill out the quiz.

Although Scudder and Stein Roe don’t have formal investor quizzes, prospective investors who call their 800 numbers can ask telephone agents for advice. The agents ask many of the same questions that appear on the Dreyfus and Fidelity quizzes.

The appeal of these programs is simple. People need to diversify their assets among different types of investments. But few know exactly how to do this. Those who don’t want to pay a financial planner can get valuable help by just filling out the questionnaires, some industry experts maintain.

“They’re making asset allocation available to a wider audience. And that’s great,” says Don Phillips, publisher of the 5-Star Investor, a Chicago-based mutual fund information service.

Others disagree.

“You can’t do financial planning by mail,” complains Morie Reiff, president of Planned Asset Management in Encino, a financial planning firm. “There are an abundance of subjective items that enter into the equation. These are things that you have to explain and talk to people about.”

Meanwhile, Fidelity’s program has a few strange twists worth mentioning.

The main selling point of the program is that you can immediately diversify your portfolio between a mix of assets, even if you only have $2,500--the minimum initial investment--and one “asset manager” fund to your name.

But you may not be as diversified as you think.

Although the asset manager funds are supposed to mirror the appropriate pie chart, fund managers are given a great deal of discretion to put far more or far less assets in any given category.

“We do have a lot of leeway,” acknowledges Jonathan F. Weed, a Fidelity portfolio manager. “But we are always looking back to what our objective is, and that’s to reduce risks over broad categories of investments.”